- US commercial real estate (CRE) fundamentals strengthen despite negative sentiment, with investment volume up 22% in 2025.
- Macroeconomic data shows growth: GDP expanded 2.2% in 2025, inflation moderated to 2.4%, and unemployment remained historically low at 4.3%.
- Transaction and lending activity in CRE are rebounding, pointing to improved liquidity and stabilized asset values.
- Valuations have reset, creating favorable entry points as CRE markets shift from peak-cycle leverage to more sustainable fundamentals.
Sentiment vs. Reality: A Growing Gap
According to Virtus Real Estate Capital, commercial real estate sentiment remains cautious despite improving fundamentals. However, the underlying data points to a strengthening recovery across the US CRE market.
Real GDP grew 2.2% in 2025, while inflation cooled to 2.4%. At the same time, unemployment held near historic lows, reinforcing economic stability. Together, these factors continue to support demand and performance across commercial real estate.
CRE Fundamentals Strengthen
The CRE market benefits from stronger liquidity, rising transaction volume, and reset asset valuations. Investment activity continues to gain momentum. Total US CRE investment volume rose 22% year over year in 2025, reaching $499B. In Q4 alone, volume jumped 29% to $172B, according to CBRE. Meanwhile, lending conditions have stabilized across the market. CBRE’s Lending Momentum Index climbed to 1.2, its highest level since 2018. This increase signals that risk appetite is returning to credit markets.
Sector Dynamics and Valuation Resets
Multifamily leads the recovery, capturing the largest share of investment activity as capital returns to the sector and fundamentals stabilize. Across asset types, recent repricing has left CRE at some of the most attractive valuation levels in decades. The lending environment is more disciplined, with financing extended to strong sponsors and well-performing assets, while less resilient assets face restructuring or discounted sales. Recent sentiment readings also show improving stability across the market, reinforcing the view that pricing has begun to normalize.
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The Impact of Economic Conditions on CRE
Lower interest rates, easing inflation, and steady employment have improved the outlook for CRE. The market is shifting from multiple expansion to a focus on operational income and asset management. Despite a looming wave of loan maturities, well-capitalized investors are positioned to capitalize as price discovery resumes and distressed assets come to market at reset valuations.
What’s Next for Commercial Real Estate
The commercial real estate sentiment gap versus fundamentals may offer patient investors attractive entry points. As transaction activity accelerates and lending momentum builds, the US CRE market is poised for a broader recovery driven by real income growth and selective capital allocation. Investors able to identify stable sectors and employ disciplined asset management will likely outperform as the recovery broadens.
